Politics

Detroit Breakdown

How the Big Three’s lost clout in Washington may actually help the auto industry.

Car lot.
Ford trucks 

Who says America’s Big Three automakers are lumbering, bureaucratic relics incapable of reading the public mood? Just last month, their CEOs traveled to Washington on their corporate jets. (At least partly because of that decision, they returned home with no federal largesse and hardly any public sympathy.) For this week’s visit, at least two of the CEOs plan to drive —and the third, Chrysler’s Robert Nardelli, says he won’t be taking a private jet.

Still, it’s unlikely the Big Three will receive a very warm reception in Washington, even if they do succeed in winning $25 billion in loans. Public and congressional sentiment is arrayed against them. Their best friend, Rep. John Dingell, has just been deposed from his committee chairmanship. For now, Detroit’s political clout seems to be gone.

It may be the best thing that’s happened to the industry in decades.

Since at least the 1960s, Washington has restrained some of Detroit’s worst impulses. And when Washington has allowed Detroit to have its way—in other words, when Detroit has enjoyed its greatest clout—the consequences have not been good for either the industry or the nation.

Over the past 60 years, Congress has been steadfast in its support of the auto industry. After World War II, when General Motors, Ford, and Chrysler made peace with the mammoth United Auto Workers union, congressional friends of business, labor, and consumers stood united in their allegiance to the welfare of the industry. In 1956, the federal government rewarded the nation’s largest industry with its largest-ever public-works project: the interstate highway system.

A few years later, as critics began to blame the industry for increasing accidents and pollution, Detroit offered no concessions. In the early 1960s, GM’s cover-up of the Chevrolet Corvair’s safety defects was merely the worst example of the industry’s refusal to take the most basic steps to make crashes less likely or less deadly. The carmakers had decided that “safety doesn’t sell,” and there was little sign that the free market would do much about the rising highway death toll.

Finally, with public concern rising, Washington decided to intervene. Congressional hearings, and Ralph Nader’s sensational 1965 book Unsafe at Any Speed, helped rally support for the passage of the 1966 National Traffic and Motor Vehicle Safety Act, which authorized the government to mandate a long list of safety improvements—things we have long since taken for granted, like seat belts, collapsible steering columns, and padded dashboards.

At the same time, visibly worsening air pollution set off another clash between Washington and Detroit. First the state of California and then the federal government pressed for limits on automotive emissions. The carmakers insisted that the technology was not available and that they would be ruined by mandatory pollution controls. But when the mandates were set, they managed to comply.

Perhaps the auto industry eventually would have come around to the idea that it was bad business to keep killing its customers and poisoning their air. But it was Washington that forced Detroit to address its problems, insisting on rules that would permit cars to keep on choking and killing people, if only at a slower rate.

Soon afterward came the first oil shock in 1973, when gas lines and angry motorists forced politicians to confront the specter of dwindling oil supplies. Washington responded in 1975 with the Corporate Average Fuel Economy rules. Once again, Detroit argued that the goals were impossible and that they would drive the carmakers to bankruptcy. Once again, they were wrong. By the time of the second oil shock in 1979, they were well on their way to building the more-fuel-efficient vehicles that their customers actually wanted—thanks to Washington.

But that was the end of an era of strict regulation. During the 1980s and 1990s, most proposals for new rules—notably stricter fuel-economy standards—died in Washington. The carmakers grew accustomed to getting their way on Capitol Hill, aided by the United Auto Workers and by lawmakers from both parties. Most prominent among them was the powerful chairman of the House energy and commerce committee, Democratic Rep. John Dingell of Michigan. He was far from alone, however, in echoing Detroit’s arguments that Americans wanted bigger automobiles and that Washington should not interfere. By the 1990s, those big automobiles were mostly SUVs—an entire class of vehicle promoted by Washington’s failures. Most of the safety, pollution, and fuel-economy regulations applied more weakly, if at all, to vehicles classified as “light trucks,” and Detroit designed the new SUVs to roar through those gaping loopholes.

In an era of low fuel prices, Detroit had once again found a winning formula. Emissions increased somewhat, fuel consumption soared, and the highway death toll once again inched upward. But the politicians declined to interfere. Perhaps it would have been better if they had: The SUV boom depended on cheap oil, and when oil prices shot up, Detroit was in big trouble.

Which brings us to late 2008, with fleets of unsold SUVs foundering in a sea of red ink and the Big Three no longer so welcome in the halls of Congress. When the CEOs were asked last month about mistakes they had made, Nardelli was the only one to offer any kind of mea culpa. “The mistake Chrysler probably made during that period is that we were responding to the customer who wanted bigger, more expansive, higher horsepower vehicles to go with their second homes, their boats, their trailers,” he explained. “And we chased that consumer demand up. Lesson learned for us.”

The lesson, apparently, was that short-term consumer demand is a poor guide to long-term strategy. The carmakers—and their customers—may sometimes need a firm hand to restrain their most destructive impulses. It’s generally a bad idea to expect members of Congress or occupants of the White House to think past the next election. But Washington has done a better job than Detroit of looking after the auto industry’s long-term interests.